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Sunday, 08 November 2015 23:59

Continued improvement in state economy leads to loan growth for West Michigan banks

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Community banks based in West Michigan posted solid loan growth in the last few months, continuing recent momentum brought about by the state’s improved economy.

Bankers reported rising demand for commercial loans as they released their latest quarterly earnings that in general grew with Michigan’s economic performance.

“Our business activity levels reflect healthy economic trends that are being reported for western and central Michigan, suggesting growth will continue through the coming months,” Mercantile Bank Corp. Chairman and CEO Mike Price said in a conference call with analysts to discuss third quarter results.

The Grand Rapids-based Mercantile Bank originated $145 million in commercial loans for new and existing borrowers in the third quarter and $365 million in loans since the first of the year. The bank has grown lending at an annualized rate of 8 percent in 2015 and ended the quarter with total loans of $2.22 billion.

Unfunded commitments for commercial construction and development loans totaled about $100 million at the end of the third quarter, and the bank expects those “to be largely funded over the next 12 to 18 months.”

Mercantile Bank’s loan growth came from a “good mix” of commercial and industrial borrowers and owner-occupied and non-owner-occupied commercial real estate, said Chief Operating Officer Robert Kaminski. The bank, which presently has 53 offices in central and western Michigan, has “significant funding” of loan commitments for commercial construction that “was centered in our larger urban markets,” Kaminski said.

Based on what’s in the pipeline, Price believes that strong commercial loan growth can continue into 2016.

“Certainly I wouldn’t discourage that notion because it’s been pretty robust throughout this entire year and if not for some of the pay-offs we received, that’ll be even higher,” he said. “So I think that seems to be a pretty sustainable level from our standpoint at this point in time.”

At Holland-based Macatawa Bank Corp., which has 26 offices in Kent, Ottawa and northern Allegan counties, commercial loans grew year to year by $57.4 million to $882.0 million.

Chemical Financial Corp. reported what CFO and Treasurer Lori Gwizdala called “robust” organic loan growth of $600 million, or 12 percent, since the third quarter of 2014 and about $420 million since January. About half of the organic growth since the start of 2015 was through commercial borrowers and commercial real estate loans, and predominantly commercial and industrial clients.

Independent Bank Corp. reported an increase of $15.3 million in commercial loan balances during the third quarter for an annualized growth rate of 8.6 percent. The Ionia-based Independent Bank originated $75.4 million in commercial loans during the quarter and $157 million in loans since the start of the year, said President and CEO Brad Kessel.

The bank’s current pipeline for new loans, despite a decrease from the second quarter, “is still strong,” Kessel said.

Banks credit their loan volume growth to the state’s economy, although economic outlooks do indicate softening ahead.

Michigan’s economy recorded its sixth-straight year of recovery this summer, University of Michigan economists wrote in a recent briefing in which they anticipated slower job growth for the second half of the year and the first six months of 2016. U-M economists, however, still see job growth “settling in to average a still-solid pace of 1.4 percent in the first half of 2016, then moving up to 1.6 percent during the second half of next year, and averaging that same pace during the first half of 2017, before nudging down to 1.4 percent again by year-end 2017.”

Likewise, the latest quarterly survey by the Business Leaders for Michigan found respondents “slightly more pessimistic” than three months ago on both the state and U.S. economies.

Among survey respondents, 26 percent believe that Michigan’s economy will experience modest growth in the next six months and 67 percent expect it to remain the same. Thirty percent expect growth in the state’s economy in the next 18 months.

CEOs answering the survey also expect Michigan to outperform the U.S. economy over the next year and a half, despite slowing growth.

Read 1897 times Last modified on Sunday, 22 November 2015 18:56

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